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Transcript

Hi, my name is Dr. Michael McDonald.I'm a Professor of Finance
at Fairfield University.Today, I'd like to talk to youabout "Pricing Strategy
with Business Intelligence".Let's get started, shall we?

0:14

All right, today,we're going to break the talk up
into four different modules.First, we're going to talk about,
why product pricing matters.Second,
we're gonna talk about, a backgroundon what we call price discrimination;which despite the negative connotation,
around the word discrimination,it's actually a positive thingfor businesses
and it's completely legal.In module three, we're gonna talk about,
different types of price discrimination.And then finally, in module four,we're gonna talk about,
how to use price discriminationto increase profits at a firm.

0:46

Module 1: Why product pricing matters?

0:51

So you're probably aware
that for businesses pricingis an enormously important factor
in achieving success and profitability.In fact, price
is one half of the revenue equation.People often focus
on increasing sales at a business,when the truth is, it's frequently
much easier to optimize our price.The basic idea hereis that different people
are willing to pay different amountsfor the same product.For instance, I might be willing to pay
a lot for a hamburger,if I'm very hungry.In contrast, if you're not very hungry,you might be willing
to pay very little, right?It's that old adage about,water being the most valuable resource
on Earth,to somebody that
just walked out of the desert.On the other hand,if you have water and you live in a city,
or something like that,the water is worth almost nothing.And so the idea is that intuitivelydifferent customers are willing
to pay different amounts,for exactly the same product.You probably see this
when you go to, say a car dealership.You haggle with the car dealerbecause you are willing
to pay a different amountthan somebody else might be willing to.This applies in lots
of different contacts,across lots of different industries.And if you start looking around,I bet that you'll find
a few circumstanceswhere even, in your day-to-day life,you can observe different prices
for different customers,based on their level of demand.